Citigroup's board likely to be reelected in a landslide

Citigroup (C) shareholders vote today at their annual meeting and no one will be surprised when they reelect their entire board of directors. After all, they're running unopposed. That's right. Hard as it is to believe, given the dismal performance of the bank, which has lost 90 percent of its share value in a year and survives solely because it's taken about $50 billion in loans from the government.

That election victory could be short-lived, though. Sometime in May the Treasury Department will own 36 percent of the bank when its TARP loans are converted to common shares. The government will then be the biggest shareholder of Citigroup, at which point there is expected to be a major shake-up.

"There has be to a cleaning of all that was at Citigroup. Anyone who was involved with the board in the lead-up to the crisis is tainted," Peter Sorrentino, a senior portfolio manager at Huntington Asset Advisors, told Bloomberg. He believes that any board member who approved the risks that got the bank into all this trouble should be ousted.

Two possible Pandit replacements discussed at the FDIC are CFO Ned Kelly and Gary Crittenden, Kelly's predecessor and chairman of the division housing Citi's non-core assets, according to the report in the Financial Times.

Calls for ousting Citi's board are not only coming from the government. RiskMetrics Group's ISS Governance and San Francisco-based Glass Lewis & Co. want Citi's directors out, too. The American Federation of State, County and Municipal Employees is campaigning against six current and former members of the board's Audit and Risk Management committees. Richard Ferlauto, AFSCME's director of corporate governance told Bloomberg, "If there were a board Hall of Shame, Citi's would be on it. The board has failed, and the directors have contributed to the lack of oversight."

The problem for now is that the board members are running unopposed. So a "no" vote leaves the seat empty until another board member is found. Brokerage firms and money managers, who vote a large portion of the shares, tend to go along with the board nominees.

Of course, all that is likely change when the Treasury Department is voting 36 percent of the shares. Its voting block along with those already protesting will make it easy for Treasury to oust current board members and replace them with ones the government can support. As I discussed yesterday, it's increasingly clear that the price for our corporate greed and incompetence is back-door nationalization.

Lita Epstein has written more than 25 books including "Reading Financial Reports for Dummies" and "Trading for Dummies."